In 1965, President Lyndon Johnson signed legislation creating Medicare—government health insurance for America’s elderly. At the beginning, there was only Part A hospital insurance and Part B outpatient services for things like doctor visits.

 

As the program developed, other ways to deliver Medicare were created. In 1997 Part C or Medicare Advantage (MA) plans were added. MA plans were offered by private insurance companies that contracted with the federal government to offer Part A and Part B healthcare along with other features not available with Original Medicare; things like dental, vision and hearing coverage.

 

In 1980, Medicare supplement plans, also known as Medigap plans began. Supplement plans were issued by private insurance companies and were designed to cover the costs not covered by Original Medicare, which covered 80% of approved medical bills. A supplement paid the remaining 20%.

 

Finally, in 2003, the federal government created Part D—stand-alone prescription drug insurance. Part D was offered by private health insurance companies and typically paid most of the cost for prescriptions filled by their enrollees. Part D was also added to Medicare Advantage plans at the same time.

 

With so many options and so many companies, people began to shop around from time-to-time to see if they could get better coverage or a better price. The government stepped in and set rules for moving from one plan to another which included specific enrollment periods.

 

The Open enrollment period runs October 15-December 7 and is the time you can move from one Medicare Advantage plan to another, switch from Original Medicare to Medicare Advantage or the other way around, change from one Part D plan to another or cancel Part D all together.

 

The General enrollment period runs January 1-March 31. During this period, you can sign up for Medicare if you didn’t sign up when you were first eligible. It’s also the time you can change from one Medicare Advantage plan to another.

 

However, the federal government did not set enrollment periods for Medicare supplement policies. You can change from one Medigap plan to another but the rules for switching are not the same and in fact, are much more stringent.

 

If you decide to switch from one Medicare supplement plan to another, you can apply anytime during the year. But here’s the rub. If you enrolled in a Medigap plan when you were first eligible, by law, you had to be given the best price no matter what your health was like. But when you apply for another Medigap plan you will be subject to medical underwriting. Depending on your health, the insurance company may decide to accept your application but charge you a higher premium or your application may be rejected.

 

There are a handful of states that have addressed the issue of switching Medigap policies. They’ve instituted “The Birthday Rule.” It’s an annual enrollment period that allows you to change Medigap plans once a year without answering health questions. There are different rules in different states. For example, Oklahoma, Oregon, Idaho and Illinois allow you to enroll in a Medigap plan of equal or lesser value than your current plan with any carrier. California, Nevada, Louisiana, Kentucky and Maryland allow you to enroll in a Medigap plan of equal or lesser value than your current plan only through your current carrier.

 

So, should you switch Medicare supplement policies? You’ll have to answer these questions before you can decide:

  • Can you get a better price
  • Will you get better benefits
  • Will you get better customer service
  • Will you have to go through medical underwriting
  • Could you be rated or rejected because of your health
  • Does your state have a Birthday Rule that eliminates health questions
  • Is it worth the time and effort

 

Do your homework. Know exactly what factors are involved in switching to the company you’re considering and what hoops you’ll have to jump through. Talk with a Medicare expert who can provide answers that may not be readily available to you. Planning ahead may discover options you haven’t considered and save you time and major frustration.

 

 

Disclaimer:

This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.